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Single sourcing vs. sole sourcing

Learn all about the differences between single and sole sourcing and the benefits and challenges they both have

What is the difference between single sourcing vs. sole sourcing?

Single sourcing is where a particular supplier is chosen by an organisation, even when other suppliers are available. Sole sourcing is where there is only one supplier available for the required product or service that your organisation needs. It’s also sometimes referred to as monopolistic supplier.

Single sourcing decisions are typically made at top management level. It’s usually chosen to reduce costs as it’s possible to negotiate a better deal with a supplier. When opting for single sourcing, it’s important to consider your suppliers prior commitments and if a past relationship was successful. However, when opting for sole sourcing, you have no choice but to work with that supplier which often means that there are much higher costs involved. When restricted to sole sourcing, innovation and thinking outside of the box may offer options to introduce new materials and supply possibilities. This then may offer an opportunity to remove the monopolistic supplier from the supply chain.

 

What are the advantages or disadvantages between single sourcing vs. sole sourcing?

Both single sourcing and sole sourcing have their benefits and challenges. Take a look at the advantages and disadvantages below.

Single sourcing advantages:

  • It’s much easier to negotiate a better deal with different suppliers
  • Single sourcing can offer continuous levels of quality and price stability
  • Single sourcing can result in reduced order lead times
  • Building a strong relationship is easier with just one supplier and helps to build trust between buyer and supplier
  • Single sourcing often means admin costs are reduced as you’re placing orders with just one supplier
  • It’s easy to integrate systems with one supplier

Single sourcing disadvantages:

  • Single sourcing can be a high-risk method as dependency on one supplier increases your vulnerability of supply.
  • If your supplier experiences disruption, this could mean you are not able to get the supplies you need.
  • Single sourcing may mean that you need to benchmark market prices periodically to ensure you are achieving the best value for your organisation.
  • Alternative suppliers may bring new and innovative products into the marketplace that you may not have awareness of or access to.

Sole sourcing advantages:

  • Managing one supplier is easier and less cumbersome than managing multiple suppliers
  • Access to unique capabilities of the sole source supplier.
  • Sole sourcing is not time-consuming. As there is just one supplier that offers the goods or services, you don’t need to go through the process of finding the most appropriate supplier.
  • The supplier is knowledgeable about the products they produce.

Sole sourcing disadvantages:

  • There is a risk of less buyer-supplier cooperation and high levels of dependence on the supplier.
  • As only one supplier is available, this can run the risk of lower supplier quality.
  • Higher procurement costs as there isn’t an option to negotiate a better deal.
  • There could be significant delays when choosing to sole source. As the supplier only produces that product, there could be a hold up if they experience multiple orders.
 

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